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TMI Blog2022 (2) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... funds. So far as the effect of amendment brought in by Finance Act, 2021 is concerned, we find that Finance Act, 2021 has proposed amendment to Sec.36(1)(va) and Sec.43B to clarify the position that Sec.43B would never apply to such contributions. The controversy as to the date of applicability of amendment arises in view of the fact that both the Memorandum as well as the Finance Bill state that relevant amendment will take effect on 01/04/2021 and apply to Assessment Year 2021-22 and subsequent assessment years. The submissions of the revenue would be that the amendment is merely clarificatory in nature and would have retrospective operation. However, the assessee would maintain that the provisions would have prospective operations only and the pre-amended period would be largely guided by the ratio of judicial pronouncements favoring the assessee - Decided in favour of assessee. - ITA No. 281/Chny/2021 - - - Dated:- 23-2-2022 - Shri V. Durga Rao, Judicial Member And Shri Manoj Kumar Aggarwal, AM For the Appellant : Shri Yeswanth Kumar (CA)-Ld. DR. For the Respondent : Shri P. Sajith Kumar (JCIT)-Ld. DR. ORDER Manoj Kumar Aggarwal (Accountant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late remittance of Employee s contribution would deprive crores of Employees of the rightful earning of interest and earning of timely benefits on their contribution for the period for which the employer held such moneys of the employee used it illegally for their own business purposes and thus unjustly enriching the employer. The Ld. DR submitted that the sums were received by the employer in fiduciary capacity and any late remittance of the same should result into denial of deduction to the assessee in terms of the provisions of Sec.36(1)(va). 3.2 The Ld. DR submitted that amendment brought in by Finance Act, 2021 to Sec.36(1)(va) as well as to Sec.43B would be prospective in nature as would be evident from the explanatory note to the Finance Act- 2021 which read as under: - Though section 43B of the Act covers only employer's contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer contribution and employee's contribution towards welfare fund. It may be noted that employee's contribution towards welfare funds is a mechanism t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutions were always intended to be treated differently by the legislatures. The same would also be evident from CBDT Circular No.22/2015 dated 12.12.2015 which clarified the position as under: - ....Accordingly, w.e.f. 1.4.1988, the settled position is that if the assessee deposits any sum payable by it by way of tax, duty, cess or fee by whatever name called under any law for the time-being in force, or any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, on or before the 'due date' applicable in his case for furnishing the return of income under section 139(1) of the Act, no disallowance can be made under section 43B of the Act. It is clarified that this Circular does not apply to claim of deduction relating to employee's contribution to welfare funds which are governed by section 36(1)(va) of the IT Act . In the above background, Ld. DR submitted that the assessee was bound to follow the statute and not be guided by interpretations of law, as pronounced by various judicial authorities particularly when there is no uniformity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered as per the respective statutes of ESI and PF and not as per the Income Tax Act due date for filing the return. Thus, it was the submissions of Ld. DR that the appeal is liable to be dismissed since allowing the deduction would run detrimental to the rightful earning of crores of low paid employees. Our findings and Adjudication 4. We find that as per the provisions of clause (b) of Sec.43B of the Act, any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund and gratuity fund or any other fund for the welfare of employees would be allowed as deductions only on actual payment. However, the proviso to Sec. 43B provides that if the said sum is paid on or before due date for furnishing of return of income u/s. 139(1) of the Act, the deduction would still be available to the assessee. The term Income as defined in Sec.2(24)(x) include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of the Employees State Insurance Act, 1948 (ESI) or any other fund for the welfare of such employees. In other words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome u/s 139(1). It was held that the provisions of Sec.43B start with non-obstante clause and provide that notwithstanding anything contained in any other provision contained in this Act, a deduction otherwise allowable in this Act in respect of any sum payable by the assessee as an employer by way of contribution to any welfare fund, shall be allowed if it is paid on or before the due date as contemplated under Section 139(1). This provision has nothing to do with the consequences provided for under the PF Act / PF Scheme / ESI Act, for not depositing the 'contribution' on or before the due dates as specified therein. It was examined that the expression 'contribution' as defined in Section 2(c) under the PF Act would mean a contribution payable in respect of a member under the scheme or the contribution payable in respect of an employee to whom the Insurance Scheme applies. If this definition is read with sub-para (1) of paragraph 29 in Chapter-V of the PF Scheme, it would mean that the contributions payable by the employer under the scheme shall be at a particular rate and the contribution payable by the employee shall be equal to the contribution payable by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. Following the same, similar decision was rendered in Pr. CIT V/s Rajasthan State Beverages Corpn. Ltd. (supra). 8. We find that the revenue preferred Special leave Petition (SLP) against this decision which was dismissed by Hon ble Supreme Court (reported as 84 Taxmann.com 185; 04/07/2017) with following observations: - 1. Delay condoned. 2. We do not find any merit in this petition. The special leave petition is, accordingly, dismissed. In other words, the issue could be said to have attained finality since no merit was found in the revenue s petition by Hon ble Apex Court. 9. A similar view favorable to assessee has been taken by Hon ble Karnataka High Court in Spectrum Consultants India Pvt. Ltd. V/s CIT (49 Taxmann.com 29; 09.12.2013); Hon ble High Court of Bombay in CIT V/s Ghatge Patil Transports Ltd. (53 Taxmann.com 141; 14.10.2014); Hon ble De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the above-said decisions, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case (Appeals) stand dismissed. No costs. Consequently, M.P.No.1 of 2015 is also dismissed. However, in later decision titled as Unifac Management Services (India) P. Ltd. V/s DCIT (100 Taxmann.com 244; 23.10.2018), the single judge bench of Hon ble Court has held that the scope of Section 43B and Section 36(1)(va) are different and thus, there is no question of reading both provisions together to consider as to whether assessee-employer is entitled to deduction in respect of sum belatedly paid towards employee contribution and therefore, for considering such question, application of section 36(1)(va) read with section 2(24)(x) alone is proper course. It was further held that though an amendment has been introduced to Section 43B, whereby actual date of payment is enou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the revenue would be that the amendment is merely clarificatory in nature and would have retrospective operation. However, the assessee would maintain that the provisions would have prospective operations only and the pre-amended period would be largely guided by the ratio of judicial pronouncements favoring the assessee. 13. We find that this issue has already been settled by co-ordinate bench of this Tribunal in Adyar Anand Bhawan Sweets India Pvt. Ltd. V/s ACIT (134 Taxmann.com 56; 08.12.2021). In the said decision, it has already been held by the coordinate bench that the amendment to Sec.36(1)(va) by way of insertion of explanation-2 would operate prospectively only. This view has been taken by the bench considering the ratio of decision of Hon ble Supreme Court in the case of CIT v. Vatika Township (P.) Ltd. [2014] 49 taxmann.com 249/227 Taxman 121/367 ITR 466 (SC) and it was finally held that the amendment brought in by Finance Act, 2021 to the provisions of Section 36(1)(va) as well as to the provisions of Sec.43B would have prospective application only. The pertinent observations of the bench were as under: - 6.7 We noted from the judgment of Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of provident fund and ESI, whether the due date is as per the respective acts or up to the due date of filing of return of income of the assessee. As noted by Hon'ble Supreme Court an amendment made to a taxing statute can be said to be intended to remove hardship only of the assessee and not of the Department. Imposing of a retrospective levy on the assessee would be caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from a particular date. In the present case also, the amendment brought out by Finance Act, 2021 w.e.f. 1-4-2021 i.e. for and from assessment year 2021-22 of Explanation 2 to s. 36(1)(va) of the Act and not retrospectively. 6.9 Thus, from the above, it is clear that the amendment brought in the statute i.e., by Finance Act, 2021, the provisions of section 36(1)(va) r.w.s. 43B of the Act amended by inserting Explanation 2 is prospective and not retrospective. Hence, the amended provisions of section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue of assessee's appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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